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A retirement savings catch-up

Question: I am a 58-year-old female, currently employed. I've got approx $100,000 saved in a 401(k) plan. I've had to take out a student loan to cover the cost of one year toward my MBA, which I have completed. Because of the student loan, I've decreased the 401(k) contribution -- normally 25 percent of my pay -- to 6 percent. I'll have the student loan paid off by April 2012. The loan is for $19,000. I plan to work until I am 68 or so.

Since I am worried sick that I won't have enough when I retire, do you have suggestions about how to catch up? Perhaps the answer is as simple as "Save as much as you can." Thank you for your help. Danica, Houston, TX

Answer: First of all, you're still contributing to your retirement fund. The degree should also increase your earnings power. You'll have the debt paid off in a very short period. So, yes, save more. But it seems to me you're in pretty good shape.

Now, once the debt is retired, a catch-up option is the additional contribution that anyone 50 years and older can make into a 401(k). The maximum contribution into a 401(k) goes up to $17,000 in 2012. Those 50+ participants can contribute an additional $5,500 in 2012 for a total of $22,500. Of course, most people can't afford to siphon off that much of a paycheck into retirement savings, but the more generous limit is there.

However, I think even more important for your retirement planning is the degree you're getting. You made an investment in your education.

My own feeling is that the lesson of two bear markets and two recessions in less than a decade is that most of us will have to earn some money well into the traditional retirement years. Earning a paycheck -- even a slim, part-time one -- allows us to defer tapping our retirement savings. A paycheck makes it possible to delay filing for Social Security, too -- a savvy financial move since the benefit goes up for every year you wait after age 62 and until age 70. Work helps keep us active physically, mentally and socially.

The job-tirement approach will change how we plan for retirement. Don't get me wrong: Savings throughout a lifetime is important. But it's critical to move beyond thinking about traditional assets like stocks, bonds and a home. Planning for retirement includes keeping up skills, adding to education, and nurturing informal networks of friends, family and colleagues. Scholarly research suggests that 50 percent or more of all jobs come through such informal channels and networks.

It's also underappreciated how much people can do on the spending side in their elder years. I went into more detail about the spending equation in this Makin' Money post: Retirement and Creative Spending.

Of course, many people who want to work right now can't find a job. Not all senior citizens will be physically and financially healthy in retirement. Especially vulnerable are less educated workers.

Nevertheless, the pillars of the new retirement are work longer, spend less, and delay taking Social Security.